Deputy Commissioner of Income-tax, Pnvel Circle, Panvel V. M/s. Johnson Matthey Chemicals India Pvt.Ltd, Raigad

ITA 1726/PUN/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5683 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 02-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Wholly owned subsidiary
• Section: 208; 13; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH , A PUNE VIRTUAL COURT BEFORE SH RI R.S. SYAL, VICE PRESIDENT AND SH RI S.S.VISWANETHRA RAVI , J UDICIAL MEMBER . / ITA NO S . 1 725 & 1726 / PUN /201 8 / ASSESSMENT YEAR S : 20 1 0 - 11 & 20 14 - 15 DCIT, PANVEL CIRCLE, PANVEL VS. M/S. JOHNSON MATTHEY CHEMICALS INDIA PVT. LTD., PLOT NO.6A, MIDC, INDUSTRIAL ESTATE, TALOJA, PANVEL, DIST. RAIGAD 410 208 PAN : AABCJ1620M APPELLANT RESPONDENT / ORDER TH ESE TWO APPEALS BY THE REVENUE EMANATE FROM THE COMMON ORDER DATED 10 - 08 - 2018 PASSED BY THE CIT (A) - 2, THANE IN RELATION TO THE ASSESSMENT YEAR S 20 0 - 11 & 2014 - 15 . SINCE A COMMON ISSUE IS RAISED IN THESE APPEALS, WE ARE, THEREFORE , PROCEEDI NG TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . ASSESSEE BY SHRI RAJENDRA AGIWAL REVENUE BY SHRI A.M. MAHEDEVAN KRISHNAN DATE OF HEARING 03 - 05 - 2021 DATE OF PRONOUNCEMENT 03 - 05 - 2021 ITA NOS.1725 & 1726/PUN/2018 M/S. JOHNSON MATTHEY CHEMICALS INDIA PVT. LT D., 2 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THESE TWO APPEALS IS AGAINST THE DELETION OF DISALLOWANCE OF DEPRECIATION ON I NTANGIBLE ASSETS. A.Y. 2010 - 11 : 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF MATTHEY FINANCE B.V. , NETHERLANDS . JOHNSON MATTHEY PLC, UK IS THE ULTIMATE HOLDING COMPANY. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF NICKEL HYDROGEN ATED CATALYSTS. IT FILED RETURN F OR THE YEAR DECLARING TOTAL INCOME OF RS.45,91,38,138/ - . D EPRECIATION WAS CLAIMED ON CERTAIN INTANGIBLE ASSETS: TECHNICAL KNOW - HOW, GOODWILL AND NON - COMPETE FEES. TAKING COGNIZANCE OF THE FACT THAT SUCH DEPRECIATION WAS DISALLOWED IN THE ASSESSMENT ORDER S FOR THE A.YS. 2004 - 05 TO 2012 - 13 (EXCEPT FOR A.Y.2010 - 11 UNDER CONSIDERATION), T HE AO DISALLOWED D EPRECIATION ON I NTANGIBLE ASSETS AMOUNTING TO RS.4,92,46,594/ - . THE LD. CIT(A), RELYING ON ORDERS OF THE TRIBUNAL ORDER F OR THE A.YRS. 2005 - 06, 2006 - 07, 2009 - 10 AND OTHER YEARS, DELETED THE ENTIRE ADDITION . AGGRIEVED THEREBY, THE REVENUE HAS COME UP IN A PPEAL BEFORE THE TRIBUNAL. ITA NOS.1725 & 1726/PUN/2018 M/S. JOHNSON MATTHEY CHEMICALS INDIA PVT. LT D., 3 4. WE HAVE HEARD THE RIVAL SUBMISSIONS THROUGH V IRTUAL COURT AND GONE THROUGH THE RELEVANT MATE RIAL ON RECORD. IT IS SEEN THAT THE EXTANT ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBU NAL FOR THE FIRST TIME IN ITS ORDER FOR THE A.YRS. 200 4 - 05 & 2005 - 06 (ITA NOS. 1507 AND 2036/PUN/2012 ) . VIDE ORDER DATED 12 - 12 - 2017 , THE TRIBUNAL ALLOWED DEPRECIA TION ON SUCH INTANGIBLE ASSETS WITH THE QUALIFICATION CONTAINED IN PARA 69 , READING AS BELOW : 69. BEFORE PARTING, WE MAY ALSO POINT OUT THAT AS PER THE TOLL CONVERSION AGREEMENT, THE VALUE OF PANKI ASSETS WAS TAKEN AT RS.1 LAKH. HOWEVER, THE CIT(A) HAD WORKED OUT THE COST OF 279.30 ACRES I.E. TOTAL LANDHOLDING OF ICI INDIA LTD. AT RS.174 CRORES; IN CASE THE SAME RATE IS APPLIED TO 27.52 ACRES, WHICH WAS THE PORTION OF LAND ON WHICH CATALYST BUSINESS WAS CARRIED ON, THEN THE SAME WOULD WORK TO RS.17.37 CR ORES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THAT THE VALUE OF RS.17.37 CRORES BE ATTRIBUTED TO PANKI ASSETS. HOWEVER, REVISED ALLOCATION VALUE OF LAND AT PANKI WOULD BE RS.13 CRORES, OUT OF TOTAL SLUMP PRICE OF RS.153 CRORE S. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE VALUE OF BOTH TANGIBLE AND INTANGIBLE ASSETS, ACCORDINGLY. FOLLOWING THE SAME PROPOSITION, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE DEPRECIATION ON THE VALUE OF TANGIBLE ASSETS AND FURTHER ON KNOW - HOW, TRADEMARKS AND PATENTS AND ALSO ON THE GOODWILL. THE ASSESSEE HAS ALSO CLAIMED DEPRECIATION ON NON - COMPETE FEES. THE ASSESSING OFFICER IS ALSO DIRECTED TO ALLOW DEPRECIATION ON NON COMPETE FEES OF RS.3.51 CRORES. ITA NOS.1725 & 1726/PUN/2018 M/S. JOHNSON MATTHEY CHEMICALS INDIA PVT. LT D., 4 5. FROM THIS OR DER, IT IS CLEAR THAT THE TRIBUNAL DIRECTED GRANT OF DEPRECIATION ON INTANGIBLE ASSETS BUT ON THE REDUCED VALUE IMBIBING THE EFFECT OF INCREASE IN THE VALUE OF THE PANKI LAND TO RS.13.00 CRORE AND CO NSEQUENTLY REDUCING THE VALUE OF INTANGIBLE ASSETS. THE L D. DR SUBMITTED THAT THE REVENUE HAS NOT ACCEPTED THIS ORDER AND ITS APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT IS PENDING. 6 . TURNING TO THE FACTS OF THE INSTANT CASE, IT IS SEEN THAT THE AO DISALLOWED FULL DEPRECIATION ON INTANGIBLE ASSETS. HOWEVE R, THE LD. CIT(A) OVERTURNED THE ASSESSMENT ORDER WITHOUT NOTICING THE AFORE QUOTED PARA 69 OF THE TRIBUNAL ORDER, BY WHICH DIRECTION WAS GIVEN TO INCREASE THE VALUE OF PANKI PLOT TO RS.13.00 CRORE FROM RS.1.00 LAKH INITIALLY SHOWN BY THE ASSESSEE AND THER EBY CORRESPONDINGLY REDUCING THE VALUE OF INTANGIBLE ASSETS AND THE RESULTANT CLAIM OF DEPRECIATION THEREON. THIS POSITION WAS FAIRLY ACCEPTED BY THE LD. AR. R ESPECTFULLY FOLLOWING THE PRECEDENT, WE SET - ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO T HE FILE OF THE AO FOR ALLOWING DEPRECIATION ON INTANGIBLE ASSETS BUT ONLY AFTER GIVING EFFECT TO THE AFORE - EXTRACTED DIRECTION FROM PARA 69 OF THE TRIBUNAL ORDER. NEEDLESS ITA NOS.1725 & 1726/PUN/2018 M/S. JOHNSON MATTHEY CHEMICALS INDIA PVT. LT D., 5 TO SAY, THE ASSESSEE WILL BE ALLOWED OPPORTUNITY OF HEARING IN SUCH FRESH PROCEEDING S. A.Y. 2014 - 15 : 7 . BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THIS APPEAL ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE APPEAL FOR THE A.Y. 2010 - 11. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE SET - ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE AO FOR DECIDING THIS ISSUE IN ACCORDANCE WITH OUR DIRECTIONS GIVEN ABOVE. 8. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD MAY , 2021. SD/ - SD/ - ( S.S.VISWANETHRA RAVI ) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 03 RD MAY , 2021 ITA NOS.1725 & 1726/PUN/2018 M/S. JOHNSON MATTHEY CHEMICALS INDIA PVT. LT D., 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT (A) - 2, THANE 4. 5. 6. THE P CIT - 2, THANE DR, ITAT, A BENCH, PUNE / GUARD FILE . / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 03 - 05 - 2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 03 - 05 - 2021 SR. PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BEN CH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *